Simelane and Others NNO v Seven-Eleven Corporation SA (Pty) Ltd and Another

JurisdictionSouth Africa
JudgeHefer AP, Harms JA, Schutz JA, Scott JA and Brand JA
Judgment Date26 November 2002
Citation2003 (3) SA 64 (SCA)
Docket Number480/2001
Hearing Date14 November 2002
CounselD N Unterhalter SC (with him S Stein) for the appellants. D F Irish SC (with him A Kantor) for the respondents.
CourtSupreme Court of Appeal

Schutz JA:

[1] This appeal arises out of a successful review application before Van der Merwe J, A reported as Seven-Eleven Corporation SA (Pty) Ltd and Another v Simelane NO and Others 2002 (1) SA 118 (T). The applicants (now the respondents) were two companies to which I shall refer collectively as 'Seven-Eleven'. Their managing director is Mr George Hadjidakis (Hadjidakis). The 'decision' which B was reversed was one by the Competition Commission (the commission) to refer to the Competition Tribunal (the tribunal) complaints that Seven-Eleven was conducting certain 'prohibited practices'. The commission and the tribunal were both established under the Competition Act 89 of 1998 (the Act). The commission was not cited by name, but C four of its officers were. They are the appellants. The first of them is Mr Menzi Simelane (Simelane), the commissioner. Like the other three he is cited nomine officii. The second is Ms Vernolize Ahmore Burger (Burger), a Deputy Commissioner. The third is Ms Zoleka Ntsaluba (Ntsaluba), an investigator employed by the commission. The fourth is Mr Willem Pretorius (Pretorius), who is an independent D advocate holding a general retainer to assist the commission. So the case will pass into history under Simelane's name.

[2] The reason why the review application could be brought in the High Court was that at the time of its institution, the Act did not confer review powers on the tribunal, although it had exclusive E jurisdiction in respect of matters of the kind with which this case is concerned (s 65(3) of the Act). Although the Competition Appeal Court (also a creation of the Act) had exclusive appellate and review powers over the tribunal's decisions (s 65(4)), it also did not have review powers in respect of the commission. Accordingly the High Court F at the time of institution retained its common-law review jurisdiction.

[3] Because of the general exclusion of the ordinary courts from competition matters, I do not propose dealing with the merits of the complaints laid before the commission or of its referral of them to the G tribunal. However, I shall give a brief general description of the activities of Seven-Eleven, later to touch on the merits, but only insofar as they have a bearing on the review. The frequent invitations by Seven-Eleven in the course of argument to decide some aspects of the merits will not be accepted. H

[4] There were over 200 Seven-Eleven retail convenience stores. Some of them were operated by Seven-Eleven itself, but the great majority were operated by franchisees. A relatively small number of franchisees laid complaints with the commission. The rest, or most of them, appear to be content. Indeed it is Hadjidakis's case that, apart from making a profit, he has guided numerous first-time entrepreneurs I to success. He may be correct, but that is not for us to decide.

[5] Mainly by means of the individual franchise agreements Seven-Eleven maintains a close control over important aspects of the activities of the franchisees. The name of the brand is derived from the requirement J

Schutz JA

that the stores be open for business from at least 07:00 to 23:00. Armed with its experience the A franchisor chooses the suppliers and determines the range of goods to be carried and obtains favourable prices from suppliers, using its buying power. The franchisees are thus relieved of having to choose their stock, but, on the other hand, they are compelled to take what Seven-Eleven determines they must stock. In some cases the goods are B obtained from a Seven-Eleven warehouse, in others directly from the supplier. In either case Seven-Eleven pays the supplier. It attends to advertising on behalf of all the stores and makes available its trade marks, logos and Seven-Eleven brands. At the time when the application was brought it also determined the prices at which the franchisees C sold. It would identify locations suitable for the opening of stores and would, in some cases, hire premises for subletting to franchisees. When a store was opened Seven-Eleven would at its own expense provision it with a full range of stock. The value of this initial stock would have to be repaid over three years. Needless to say all of this was not D done out of charity. In various ways Seven-Eleven recompensed itself, for instance by way of royalties, rentals, commissions and rebates on purchases.

[6] The complaints were lodged late in 1999. In terms of s 45(1) it was then the duty of the commission to appoint an inspector and investigate the complaint. This it did. E

[7] On 14 February 2000 Hadjidakis attended a meeting presided over by Burger. Also present were Ntsaluba and Pretorius. Together with Simelane (who was not present at the meeting) these persons are the appellants. Hadjidakis complains resentfully about the way in which he says he was inveigled into attending without legal F representation, and about the manner of the interrogation. I shall revert to this meeting when dealing with his various submissions.

[8] At about the time the franchisees lodged their complaints with the commission they also brought urgent proceedings before the G tribunal, seeking an interim interdict. Such relief was granted (by a majority of two to one) on 31 March 2000, in respect only of s 5(2) of the Act - that is Seven-Eleven was interdicted from imposing minimum resale prices. Seven-Eleven obeyed the interdict and claims that when it expired after six months, it merely recommended H retail prices without exercising any compulsion. The remainder of the interim relief claimed was refused.

[9] On 4 May 2000 Ntsaluba deposed to an affidavit in support of a referral of the complaints of the discontented franchisees to the tribunal. The referral itself is signed by Simelane, purporting to act for the commission. It invokes sections included in chap 2, I namely 4(1)(b) (restrictive horizontal practices), 5(1) (restrictive vertical practices), 5(2) (minimum resale price maintenance), 8(a) (charging an excessive price by a dominant firm) and 8(d)(iii) (exclusionary acts by a dominant firm, including selling goods or services on condition that the buyer purchases J

Schutz JA

separate goods or services unrelated to the object of a contract, or forcing a buyer to accept a condition unrelated to A the object of a contract). Seven-Eleven is accused of

'enforcing restrictive practices which include rental agreements, forced purchases, shop fittings, price fixing, insurance, sale of business and designated supplier'.

[10] Hadjidakis's complaints about the commission's handling of matters leading to the referral are numerous. Before dealing with them B it is desirable to broach two matters arising in this appeal. The first is the application of the rule in Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A). The heads of argument filed on behalf of Seven-Eleven are replete with instances where a proposition is advanced with reference to Hadjidakis's C founding or replying affidavit, whilst the contrary version put forward by the appellants is ignored or diminished. Such an approach is the converse of that laid down in Plascon-Evans at 634H - I, to the effect that in a case such as this, the decision must be based on those facts averred by the applicant which are admitted by the D respondent, together with the facts averred by the respondent. Instances in which the rule has been ignored will be mentioned under the individual complaints.

The second aspect to which I refer relates to the nature of the differing functions of the commission and the tribunal. Once this is clarified many of Seven-Eleven's complaints may be simply answered. E

The respective functions of the commission and the tribunal

[11] The main underlying legal dispute is whether the Act provides for a dichotomous procedure for the resolution of a complaint. The appellants say that there are two distinct stages. The role of the F commission is investigative, whereas that of the tribunal is adjudicative. The commission receives a complaint, investigates it and then determines whether it should be referred to the tribunal. If it does refer it, then it appears before the tribunal as prosecutor. The tribunal, on the other hand, conducts a trial in order to determine whether the complaint is well-founded and, if it is found to be so, it decides what steps are to be taken. G

Seven-Eleven, by contrast, contends that the reliance on such a dichotomy constitutes the fundamental flaw in the argument of the appellants. The functions of the commission are said to be both investigative and adjudicative and, particularly, adjudicative in the H respects with which this appeal is concerned. Reliance is placed on cases such as Greub v The Master and Others 1999 (1) SA 746 (C) at 750A - 751D. In order to determine which of these contentions as to dichotomy is correct, brief reference to the statute needs to be made.

[12] Both the commission and the tribunal are creatures of statute, the statute being the Act. Both bodies must exercise their I functions in accordance with the Act (s 19(1)(c) and s 26(1)(d)). The commission consists of a Commissioner and one or more Deputy Commissioners as may be necessary, appointed by the Minister of Trade and Industry (s 19(2)). It must be independent and impartial and must perform its J

Schutz JA

functions without fear, favour, or prejudice (s 20(1)). Among its functions are the investigation and A evaluation of alleged contraventions of chap 2 (in which is contained ss 4 to 9) and the referral, where appropriate, of complaints to the tribunal (ss 21(1)(c) and (g)). Having so referred a matter it is then its duty and right to appear before the tribunal and participate in its proceedings (s 20(1)(g) and s 53(a))...

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21 practice notes
17 cases
4 books & journal articles
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